The affordable housing crisis: how mobile home parks provide a profitable solution, Home renovations design

The Affordable Housing Crisis: How Mobile Home Parks Provide a Profitable Solution

7 January 2025

A Pew Research Center survey found that 69% of Americans have serious concerns about the cost of housing, up from 61% in April 2023. And it’s not just the U.S. populous’s imagination or observation driving these concerns. The Federal Housing Finance Agency’s national House Price Index increased 57.8% from July 2019 to July 2024. Affordable housing is becoming challenging for the average American to find, much less secure.

Rents are rising, and mortgage rates aren’t coming down fast enough. Combine these factors with inventory shortages, and it’s easier to see why the nation is in crisis. There simply aren’t enough homes to meet demand. A supply-and-demand imbalance only aggravates affordability issues sparked by inflation or tighter credit markets.

Mobile homes could help solve the crisis since these dwellings are more cost-effective. As a result, they’re not as expensive for aspiring homeowners to purchase. The lots these houses sit on are also attractive for real estate investors, creating a win-win situation for all. Here’s how mobile home parks could provide a profitable answer to a growing problem.

Lower Costs

You’ve probably heard the age-old rule about not spending more than 30% of your monthly income on housing. However, this guideline is becoming increasingly unrealistic, with the average monthly rent of $2,021. The typical mortgage payment is even higher, landing at $2,715 for a 30-year loan and $3,552 for a 15-year note. These payments don’t include utilities, HOA dues, or maintenance.

Unless your annual income is near or in the six figures, you’re probably over the 30% threshold. However, the average mobile home sets people back $128,000. Your monthly obligation becomes more affordable with a decent down payment and a 30-year loan. You could be well below the 30% rule, depending on your income.

From an investor’s standpoint, they don’t usually incur the costs of purchasing mobile homes. Instead, they’re buying the land underneath those dwellings. A mobile home owner pays lot rent back to the investor in exchange for a place to “park” their dwelling. There’s less to maintain for investors as their responsibility is usually limited to the mobile home park’s common areas. Plus, investing in a park can make affordable housing available.

Regarding mobile home parks, Lifestyle Investing expert Justin Donald says, “I love the supply-demand equilibrium. You’ve got 44,000 mobile home parks in the United States, and about 100 are redeveloped yearly. Way less gets redeveloped because cities don’t want it, right? So, it’s hard to get the zoning. However, the cost of housing is increasing, and the available housing is less affordable. And this is the most affordable housing in affordable housing.”

Increased Demand

U.S. Census Bureau statistics on home ownership shouldn’t come as too much of a surprise. The percentage of renters among younger Americans tends to be higher and declines as people age. Percentages of homeowners versus renters tend to reach an equilibrium amongst those in their mid-thirties. Once people get past the age of 34, the share of owners outpaces that of renters.

By age 45, the chances of being a homeowner are significantly higher. People naturally want to set down roots as they establish careers and families. Homeownership is a big part of this move. But wanting to own a home and achieve this milestone rests on affordability.

The purchase price, loan terms, and recurring monthly costs must be within budget. When not enough housing developments fit this bill, the dream of home ownership becomes elusive. The availability of affordable options, including condos and mobile homes, is essential for meeting growing demand.

Investors focusing on making more affordable housing available will create favorable conditions for themselves and their communities. By upgrading and maintaining the infrastructure, investors can make mobile home communities desirable places to live. They can also work with residents and city officials to overcome the stigma associated with these developments. Park owners can then decide whether to keep renting the lots or sell them for a profit.

Stability

Homeownership comes with a sense of stability. It goes back to the notion of putting down roots. People have a property they can call their own. They have the freedom to customize their homes and avoid the stress of frequent moves.

Mobile homes aren’t necessarily an exception. Although owners can move their dwellings from one park to another, it’s usually cost-prohibitive. Owners are more likely to stay put, providing investors with the advantage of predictable returns. Unlike apartment buildings and other types of residential properties, vacancy rates are usually lower. Unless you’re developing a park from scratch, you’re likely inheriting a property with a robust tenant roster.

An ample number of tenants means you won’t have to worry about diminished returns and the hassle of filling empty spaces. You can set lot rent to be agreeable to both sides without sacrificing stable returns. Mobile homeowners get a sense of security as they realize their properties will remain affordable.

Stability also helps establish a sense of community. Long-term residents are likelier to get to know their neighbors and take pride in the neighborhood’s upkeep. Mobile home park owners don’t have to be at odds with residents if they’re willing to maintain a balance between profit and affordability. Being a part of the solution to the affordable housing crisis means setting reasonable lot rental rates and accepting steady, long-term gains over short-term ones.

Affordable Housing Solutions

The U.S. has a long way to go in making housing affordable for the average resident. It’s a complex problem with multiple contributing factors, including wages that aren’t keeping up with rising costs. Solutions must address many causes, such as restrictive zoning laws and supply shortages. Fixing the issue will also require the combined, coordinated efforts of governments and the private sector.

Naturally, investors want to gain acceptable returns. Simultaneously, people need respectable places to live that don’t stretch their budgets too thin. Mobile home parks address both sides of the coin. They cost less and offer stability. While mobile homes may not be the only solution to the affordability crisis, they’re an opportunity to start filling the wide supply-demand gap.

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